An evaluation of forex trading platform enhancements on reducing operational risks in banking: a case study of Accord Microfinance Bank
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Background of the Study
Foreign exchange (forex) trading platforms are critical for banks engaged in international transactions, where operational risks such as execution delays and pricing discrepancies can lead to significant financial losses. Accord Microfinance Bank has recently upgraded its forex trading platform by incorporating advanced features like real-time data analytics, automated trading algorithms, and enhanced risk management tools (Okoro, 2023). These enhancements aim to streamline forex operations, minimize manual errors, and reduce exposure to market volatility. The upgraded platform facilitates faster and more accurate trade executions, ensuring that the bank can respond swiftly to currency fluctuations and mitigate associated risks (Adebayo, 2024).
By integrating cutting-edge technologies, Accord Microfinance Bank has improved the reliability and efficiency of its forex transactions. The system’s advanced analytics enable proactive risk monitoring, allowing for dynamic hedging strategies that protect the bank’s financial assets. However, challenges remain, including the integration of the new platform with existing legacy systems and the high cost of continuous technological upgrades. These issues can affect the overall efficiency of the platform and its ability to reduce operational risks consistently. This study evaluates how enhancements to the forex trading platform impact operational risk reduction at Accord Microfinance Bank, providing insights into both the benefits and the challenges of modernizing forex operations.
Statement of the Problem
Despite significant upgrades to its forex trading platform, Accord Microfinance Bank still encounters operational risks that result in financial losses. A major problem is the difficulty in integrating advanced trading technologies with older legacy systems, leading to data inconsistencies and execution delays (Chukwu, 2023). These integration challenges compromise the platform’s ability to perform real-time risk assessments and execute trades efficiently. Additionally, the high cost of technology upgrades and maintenance may limit the bank’s capacity to sustain continuous improvements, while market volatility further complicates risk management efforts. These factors collectively hinder the bank’s ability to fully leverage platform enhancements for risk reduction, thereby impacting overall operational stability.
Objectives of the Study
- To evaluate the impact of forex trading platform enhancements on operational risk reduction at Accord Microfinance Bank.
- To identify integration and cost challenges affecting the platform’s performance.
- To propose strategies for optimizing forex trading operations to minimize risks.
Research Questions
- How do forex trading platform enhancements affect operational risks at Accord Microfinance Bank?
- What integration challenges hinder effective risk management in forex trading?
- Which strategies can further reduce operational risks in the trading platform?
Research Hypotheses
- H₁: Enhanced forex trading platforms significantly reduce operational risks.
- H₂: Integration challenges with legacy systems negatively impact trading efficiency.
- H₃: Regular system upgrades and staff training improve risk management outcomes.
Scope and Limitations of the Study
This study focuses on Accord Microfinance Bank’s forex operations over the past three years, using transaction data, system integration reports, and interviews with trading managers. Limitations include market volatility and restricted access to proprietary trading algorithms.
Definitions of Terms
- Forex Trading Platform Enhancements: Technological improvements aimed at optimizing foreign exchange trading operations.
- Operational Risks: Risks associated with the execution and processing of forex transactions.
- Automated Trading Algorithms: Computerized systems that execute trades based on predefined criteria.
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